carry-back relief system...carry-back relief system 1 1 aim 1.1 this e-tax guide provides details on...

Carry-back Relief System

IRAS e-Tax Guide

CARRY-BACK RELIEF SYSTEM

(Fifth Edition)


Published by

Inland Revenue Authority of Singapore

Published on 8 May 2020

First edition on 09 Jul 2012

Second edition on 26 May 2014

Third edition on 2 Apr 2018

Fourth edition on 9 Apr 2019

Fifth edition on 8 May 2020

Disclaimers: IRAS shall not be responsible or held accountable in any way for any damage, loss or

expense whatsoever, arising directly or indirectly from any inaccuracy or incompleteness in the

Contents of this e-Tax Guide, or errors or omissions in the transmission of the Contents. IRAS shall not

be responsible or held accountable in any way for any decision made or action taken by you or any

third party in reliance upon the Contents in this e-Tax Guide. This information aims to provide a better

general understanding of taxpayers’ tax obligations and is not intended to comprehensively address

all possible tax issues that may arise. While every effort has been made to ensure that this information

is consistent with existing law and practice, should there be any changes, IRAS reserves the right to

vary its position accordingly.

© Inland Revenue Authority of Singapore

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any

means, including photocopying and recording without the written permission of the copyright holder,

application for which should be addressed to the publisher. Such written permission must also be

obtained before any part of this publication is stored in a retrieval system of any nature.


Table of Contents Page

1) Aim 1

2) At a glance 1

3) Glossary 2

4) Background 4

5) Carry-back relief system 4

6) General Conditions Governing the Carry-Back Relief

(a) Same business test

(b) Shareholding test

(c) Amount of Qualifying deductions to be carried back

(d) Order of Deduction

4

4

4

5

6

7) Carry-back relief under specific scenarios

(a) Where income is taxed at concessionary rate

(b) Where group relief is claimed

(c) Where the relief reduces personal reliefs

(d) Where the relief is for limited partners of an LLP or aLP

8) Specific exclusions for carry-back relief

7

7

7

8

8

8

9) Administrative requirements for the carry-back relief 10

10) Refund of excess tax

11) Time limit for CIT to raise additional assessments

12) Contact information

13) Updates and amendments

11

12

12

13


Annex A – Illustration of how the amount of qualifying deductions to be carried back is determined Annex B – Illustration of carry-back of qualifying deductions and order of deduction where there is more than one trade

14

16

Annex C – Carry back of qualifying deductions for a company deriving income subject to tax at a concessionary rate Annex D1 – Illustration of carry-back of qualifying deductions and order of deduction where there is more than one trade subject to tax at different tax rates…………………………………………………. Annex D2 - Illustration of carry-back of qualifying deduction and order of deduction where there is one source of income subject to tax at different tax rate and one other source of income Annex E – Illustration on how carry-back relief is effected where transfer under group relief system is made

18

20

22

24

Annex F – Diagram showing order of deduction for companies at a glance Annex G - Illustration on how carry-back relief is effected for an individual Annex H – Illustration of deduction and restriction of capital allowances and trade losses of partners of an LLP

26

27

31


1

1 Aim

1.1 This e-Tax Guide provides details on the carry-back relief system.

1.2 The e-Tax Guide is relevant to you if you have unabsorbed capital allowances 1 (“CA”) or unabsorbed trade losses from your trade, business, profession or vocation for the current year.

2 At a glance

2.1 The carry-back relief under section 37E of the Income Tax Act (“ITA”) is available to all persons carrying on a business, including sole-proprietorships and partnerships. The relief will be given only if a claim is made for it.

2.2 Under the system, a person may carry back its current year qualifying deductions (“QD”) and deduct them against its assessable income of the immediate preceding YA. For YA 2020, a person may elect to carry back QD and deduct them against its assessable income for up to three YAs immediately preceding YA 2020 (i.e. YA 2017, YA 2018 and YA 2019) (referred to as “enhanced carry-back relief” in this e-Tax Guide2). To ease businesses’ cash flow, a person may also elect for carry-back relief or enhanced carry-back relief based on an estimate of the QD for YA 2020. Please refer to the e-Tax Guide on “Enhanced Carry-back Relief System” for more details on the enhanced carry-back relief for YA 2020.

2.3 The maximum amount of QD that can be carried back is capped at $100,000.

2.4 The QD will be deducted in the following order: (i) current year’s unabsorbed CA, if any,(ii) current year’s trade losses, if any.

2.5 The carry-back of unabsorbed CA is subject to the “same business” test. A company will have to satisfy the shareholding test as well.

2.6 A company can elect to carry back its QD after transferring its loss items under the group relief system3, if applicable.

1 In this e-Tax guide, the term “capital allowances” refer to allowances given under sections 16, 17, 18B, 18C, 19, 19A, 19B, 19C, 19D or 20 of the ITA.

2 The e-Tax Guide on Enhanced Carry-back Relief System can be found on the IRAS website at: https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/e-Tax_Guides/etaxguide_Enhanced Carry-Back Relief System_Budget 2020.pdf.

3 Please refer to IRAS e-Tax Guide on ‘Group Relief System (Second Edition)’ issued on 29 Mar 2019.

https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/e-Tax_Guides/etaxguide_Enhanced%20Carry-back%20Relief%20System_Budget%202020.pdf

https://www.iras.gov.sg/irashome/uploadedFiles/IRASHome/e-Tax_Guides/etaxguide_Enhanced%20Carry-back%20Relief%20System_Budget%202020.pdf


2

3 Glossary 3.1 Assessable income

Assessable income of a company refers to its income from all sources after deducting CA, trade losses, approved donations (including those transferred from related companies under the group relief system) and other relevant deductions like incremental research and development expenses or investment allowances. Assessable income of an individual refers to the individual’s income from all sources after deducting CA, losses, and approved donations.

3.2 Immediate Preceding YA

The immediate preceding YA refers to the YA immediately before the YA in which the person has trade losses or capital allowances available for carry back. For example, if the person incurred trade losses or was granted capital allowances in YA 2020, the immediate preceding YA would be YA 2019.

3.3 Loss items

For group relief purposes, loss items refer to the unabsorbed CA, trade losses and donations for the current year that can be transferred by a company (“transferor company”) to another company of the group (“claimant company”).

3.4 Person

A person in this e-Tax Guide refers to: a. a company;

b. an individual, being the sole-proprietor or partner of a partnership

[including a limited liability partnership (“LLP”) and a limited partnership (“LP”)];

c. a body of persons, such as clubs and associations; and

d. a trustee of a trust or an executor of an estate. 3.5 Qualifying deductions (QD)

For carry-back relief purposes, QD are the unabsorbed CA and unabsorbed trade losses for the current year.


3

3.6 Relevant deductions

A limited partner’s share of CA and trade losses from a limited liability partnership (“LLP”) or limited partnership (“LP”) allowed against the partner’s income from other sources.

3.7 Same business test

This test determines if a person continues to carry on the same trade, business or profession for which capital allowances are granted when carrying forward or back the unabsorbed capital allowances. The test is satisfied if the same trade, business or profession is being continued at the point when the unabsorbed capital allowances are utilised.

3.8 Shareholding test

This test computes the percentage of the shareholdings of a company (or its ultimate parent company) that is held by the same persons as at the relevant dates. If the percentage is 50% or more, there is no substantial change in the shareholders and the company is said to have satisfied the shareholding test.

Relevant dates for unabsorbed CA: First day of the YA in which the capital allowances were granted and the last day of the immediate preceding YA in which the capital allowances are to be deducted. Relevant dates for unabsorbed trade losses: First day of the year in which the trade losses were incurred and last day of the immediate preceding YA in which the trade losses are to be deducted.

3.9 Unabsorbed capital allowances (CA)

The capital allowances claimed by a person (under section 16, 17, 18B, 18C, 19, 19A, 19B, 19C, 19D or 20 of the ITA) for a YA that exceed the person’s aggregate taxable income for that YA.

3.10 Unabsorbed trade losses

The trade losses incurred by a person for a YA that exceed the person’s income from all sources for that YA.

3.11 Unabsorbed donations

The approved donations made by a person in a YA that exceeds its statutory income for that YA. Approved donations are donations qualifying for tax deduction and made to recipients under sections 37(3) (b), (c), (d), (e) or (f) of the ITA.


4

4 Background 4.1 Before YA 2006, a person may carry forward its unabsorbed CA and

trade losses to future YAs if it satisfies certain conditions under the ITA. 4.2 To help small businesses cope with cash-flow problems, especially in a

cyclical downturn, a one year carry-back of QD was introduced from the YA 2006.

5 Carry-back relief system 5.1 Subject to conditions, the carry-back relief is available to you as a person

(defined in paragraph 3.4 above) who carries on a trade, business, profession or vocation.

5.2 You may carry back the QD to the immediate preceding YA to be

deducted from your assessable income of the immediate preceding YA in the order set out in paragraphs 6.8 and 6.9.

6 General Conditions Governing the Carry-Back Relief 6.1 Your claim for carry-back relief is subject to the following general

conditions:

(a) Same business test 6.2 To qualify for carry-back relief, you must satisfy the same business test.

This means that you will not be able to carry back the unabsorbed CA granted for the first basis period that you commenced a trade, business or profession. However, you can carry back the trade loss incurred for that period as the same business test does not apply to trade losses.

To illustrate:

During the basis period for YA 2018 that you commenced a business, you incurred a trade loss of $50,000 and had unabsorbed CA of $20,000. You could carry back the trade loss of $50,000 (but not the unabsorbed CA of $20,000) to be deducted against your assessable income for YA 2017. (b) Shareholding test

6.3 If you are a company, in addition to the same business test, you have to

satisfy the shareholding test in order to carry back your QD.

To illustrate: For YA 2018, your accounting period is 1 Jan 2017 to 31 Dec 2017. You can carry back your QD for YA 2018 to YA 2017 if your shareholders as at the following dates are substantially the same:


5

Carr

y-b

ac

k o

f

Un

ab

so

rbed

CA

Dates for comparison

1 Jan 2018 & 31 Dec 2017

1st day of the YA in which the CA arose; &

Last day of the YA in which the CA is utilised

Tra

de

lo

ss 1 Jan 2017

& 31 Dec 2017

1st day of the year in which the loss was incurred; &

Last day of the YA in which the loss is utilised

6.4 The Comptroller of Income Tax (“CIT”) may waive the shareholding test

if it is satisfied that the substantial change in the shareholders is not for the purpose of deriving any tax benefit or obtaining any tax advantage. If the CIT grants the waiver, you can only deduct the QD against the income from the same trade or business for which the CA was granted or to which the trade loss relates.

(c) Amount of Qualifying deductions to be carried back

6.5 The amount of QD that you can carry back is restricted to the lowest of:

(i) your actual amount of the QD; (ii) your assessable income of the immediate preceding YA; and (iii) $100,000.

6.6 The excess that is not carried back can be carried forward for deduction against your future taxable income if you satisfy the same business test (and shareholding test if you are a company). To illustrate: Your assessable income for YA 2017

= $60,000

Your QD for YA 2018 = $72,000 Amount of QD you can carry back to YA 2017 = $60,000 Excess that you can carry forward for deduction against future taxable income

= $12,000

Annex A shows how to determine the amount of QD to be carried back.


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6.7 If your functional currency is not S$, the exchange rate to use for the purpose of computing the cap of $100,000 is based on the exchange rate of the year in which the loss arose.

To illustrate: Your functional currency is the US$. The exchange rate is 1.3833 for YA 2017 and 1.3749 for YA 2018.

You incurred a trade loss of US$150,000 for the YA 2018.

The amount of trade loss that you can carry back for deduction against your assessable income for YA 2017 is computed as follows:

YA 2018 US$ Adjusted trade loss before carry back (150,000) Less: Loss carry back to YA 2017 72,733*

Unabsorbed loss c/f (77,267) * S$100,000 / 1.3749

YA 2017 YA 2017 US$ S$ Adjusted trade profit before carry back 300,000 414,990*

Less: Loss carry back to YA 2017 72,733

100,612#

CI after loss carry-back (before partial tax exemption)

227,267

314,378

* S$300,000 x 1.3833 # S$72,733 x 1.3833

(d) Order of Deduction

6.8 The QD carried back will be deducted from your assessable income of

the immediate preceding YA in the following order:

(a) current year unabsorbed CA, if any; and then (b) current year trade loss, if any.

6.9 If you have other income in addition to trade income, the unabsorbed CA

and trade losses will be deducted against the other sources of income in the order as follows:

1st : Income from same trade 2nd : Income from other trade (proportionately if there is more than

one other trade, business, profession or vocation) 3rd : Income from all other sources (proportionately if there is more

than one other sources)


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6.10 Where your QD exceed $100,000, and they arose from more than one trade, business, profession or vocation, the amount you can carry back for each of the trade, business, profession or vocation is also determined on a proportionate basis.

Annex B provides examples on the order of deducting the QD carried

back where there is more than:

(i) one trade source; and (ii) one source of other income.

7 Carry- back relief under specific scenarios

(a) Where income is taxed at concessionary rate 7.1 If you are a company with income chargeable to tax at the normal

corporate tax rate, but your QD relate to income chargeable to tax at concessionary tax rate, the adjustment provided under section 37B of the ITA, (“adjustment factor”) has be applied for deduction across income chargeable under different tax rates.

7.2 In addition, the amount of QD (up to $100,000) is determined based on

the following formula: A + B

where A = any amount deducted against assessable income subject to tax at the normal corporate tax rate (currently 17%);

B = any amount deducted against assessable income subject

to tax at any concessionary rate of tax divided by the adjustment factor for that concessionary rate of tax;

and

the adjustment factor = Normal corporate tax divided by the Concessionary tax rate

7.3 Annex C is an example on the carry-back of QD for a company deriving

income that is subject to tax at a concessionary rate.

Annexes D1 and D2 give more examples on the carry-back of QD where there is income from more than one other trade, or more than one other source of income. (b) Where group relief is claimed

7.4 If you are a company which has elected for group relief, the amount of

QD you can carry back is the net amount after deducting the loss items transferred out to the eligible claimant company or companies. Annex E illustrates how this is being done.

7.5 Annex F shows the order of deduction for companies at a glance.


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(c) Where the relief reduces personal reliefs

7.6 If you are an individual, you are entitled to the following personal reliefs based on your earned income for that YA:

(a) earned income relief;

(b) working mother child relief (for a married woman); and

(c) deduction for CPF contributions by a self-employed.

7.7 As the QD carried back would reduce your earned income of the

immediate preceding YA, your personal reliefs for the immediate preceding YA would have to be revised accordingly based on your revised earned income for that YA. (d) Where the relief is for limited partners of an LLP or a LP

7.8 If you are a limited partner of an LLP or a LP, your relevant deductions, together with all of your relevant deductions allowed in all past YAs, must not exceed your contributed capital as at the end of the basis period relating to that YA. This restriction is known as the “relevant deduction restriction4”. Any excess of the relevant deductions over your contributed capital may then (subject to conditions) be carried forward to be deducted against your future share of income from the same LLP or LP.

7.9 The relevant deduction restriction also applies for the purpose of carry-back relief. Your capital contribution as at the end of the basis period relating to the YA that the QD arise will be used for the relevant deduction restriction. This is because your QD to be carried back relate to that YA and not the immediate preceding YA.

7.10 Annex H shows how the carry back deduction and restriction of the

qualifying deductions are applied to partners of an LLP. 8 Specific exclusions for carry-back relief 8.1 You will not be able to carry back your QD if the QD arise from certain

trade or activity carried on. They are:

(a) Qualifying deductions of a trade where the income is wholly exempt from tax

If you carry on such a trade (e.g. pioneer trade), you are not allowed to carry back the QD relating to that trade for deduction against other exempt or non-exempt income.

4 For an explanation of what is “contributed capital” and more details of the relevant deduction

restriction”, please refer to IRAS e-Tax Guide on “Income Tax Treatment of Limited Liability Partnerships (Second Edition)” issued on 1 Mar 2014.


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(b) Qualifying deductions of specific activity or trade

If you carry on specific types of activity or trade where there are rules restricting the deduction of the QD only against such trade or activity, or restricting the carry forward of the QD, you are to apply the same restriction in the carry back of the QD. The QD from such trade or activities are not allowed to be deducted against your other sources of income.

These activities or trades include:

(i) finance leasing where the income is taxable under section

10D of the ITA; and

(ii) the business of hiring out motor cars where the income is taxable under section 10H of the ITA.

(c) Qualifying deductions of a Section 10E company

If you carry on a business of the making of investments, you are not allowed to carry forward your QD arising from that business. As the QD are disregarded, the carry- back relief does not apply.

(d) Loss of eligible investors in approved start-up companies

under the Enterprise Investment Incentive Scheme (EII) 5 Currently, an eligible investor holding qualifying shares in approved start-up under the Enterprise Investment Incentive scheme (EII) may incur a capital loss upon:

(i) the sale of its qualifying shares; or

(ii) the liquidation of the approved start-up companies.

As the loss is capital in nature, it does not qualify for carry- back relief.

5 Section 97V of the Economic Expansion Incentives (Relief from Income Tax) Act [repealed

in 2016]


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9 Administrative requirements for the carry-back relief 9.1 If you wish to carry back the QD of any current YA to the immediate

preceding YA, you must make an election within the timeframe stated below:

Companies No later than the time of filing the income tax return for the current YA

Bodies of persons

Trustees

Executors

Individuals No later than 30 days from the date of service of the notice of assessment for the current YA on him

9.2 The election, once made, is irrevocable. (i) Companies making the election 9.3 Companies should indicate the election in their Income Tax Return

(Form C) and the tax computation when filing their Form C for the relevant YA. Companies that wish to make the election cannot use Form C-S. In addition, the company must have submitted the income tax return, financial accounts (may be audited/ unaudited depending on whether the company qualifies for audit exemption under the Companies Act) and tax computation6 for the preceding YA.

(ii) Individuals or partners of a partnership/LLP/LP making the election 9.4 An individual taxpayer or the partner of a partnership/LLP/LP making the

election is required to complete and sign an prescribed election form7. Apart from the election form, you have to submit the documents set out in the following tables:

Election made before or at the time of filing the income tax return

Tax Computation for: Certified financial

accounts for the basis period relating to current YA

Immediate preceding YA

Current YA

Sole proprietors: Revenue ≥ $500,000

√ √ √

Sole proprietors: Revenue < $500,000

Not required, but to indicate in the election form, the amount of QD to be carried back (including his share of the QD from a partnership/LLP/LP.

Partners of businesses, regardless of the turnover

Not required, but to indicate in the election form, your share of the QD to be carried back.

9.5 If you are a partner of a partnership/LLP/LP and have elected to carry

back your share of the QD from the partnership/LLP/LP, you need not

6 Applicable only to taxpayers who have submitted Form C in the preceding YAs. Taxpayers

who have submitted Form C-S in the preceding YAs are not required to submit these documents when electing for the carry-back relief.

7 The prescribed election form is available at www.iras.gov.sg.


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submit the financial accounts of the trade, business, profession or vocation carried on through the partnership/LLP/LP. However, you must, at the time of making the election, ensure that the precedent partner of the partnership/LLP/LP has already submitted to the CIT the following documents:

(a) the certified statement of financial accounts; and (b) the tax computation showing your share of CA/loss from the

partnership/LLP/LP.

9.6 The precedent partner may submit a set of provisional accounts and tax computation if the certified statement of financial accounts and tax computation are not finalised when the partner makes the election.

9.7 The CIT may treat the election as invalid if the precedent partner does

not comply with the requirements.

Election made after filing the income tax return 9.8 As an individual you may elect for the carry-back relief after filing your

income tax return for the relevant current YA (but no later than 30 days from the date of service of the notice of assessment for the current YA on you). You only need to submit the completed and signed prescribed election form.

Bodies of persons/trustees/executors making the election

9.9 Bodies of persons/trustees/executors may elect for the carry-back relief

by submitting the completed and signed prescribed election form, together with a provisional/finalised set of tax computation and financial accounts for the current YA and the revised tax computation for the immediate preceding YA (no later than the time of filing the income tax return for the current YA). The body of person/trustee/executor must also have submitted the income tax return and original audited/ certified statements of accounts for the preceding YA.

10 Refund of excess tax

10.1 Where there is tax to be refunded from the carry-back of the QD, the CIT

will refund the amount within 3 months from the date you make the election. If there is any tax owing by you (including that for other tax types, e.g. property tax), the amount of tax to be refunded to you is the net amount after deducting your outstanding tax liabilities.


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11 Time limit for CIT to raise additional assessments 11.1 If the CIT discovers that the amount of QD carried back and deducted

against your assessable income of any immediate preceding YA was excessive, the CIT would make an assessment on the amount which should be charged to tax within 5 years after the end of that YA.

11.2 To illustrate:

Example 1 You have carried back your trade loss of $80,000 for YA 2018 to be deducted against your assessable income for YA 2017. The trade loss is subsequently reduced to $57,000. CIT may:

(a) revise the assessment for YA 2018 (to reduce the amount of the

loss); and (b) raise an additional assessment for YA 2017 (in respect of $23,000

over allowed) by 31 Dec 2022. 12 Contact information 12.1 If you have any enquiries or need clarification on this Guide, please call:

1800-3568 300 (Individual Income Tax) 1800-3568 622 (Corporate Income Tax) 6351 3883 (Taxation of Body of Persons) 6351 3363 (Taxation of Trust/Estate)


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13 Updates and amendments

Date of

amendment Amendments made

1 09 Jul 2012 Paragraph 6.7 is inserted to clarify the exchange rate that a company should use to compute the cap of $100,000 for the qualifying deductions if its functional currency is non S$.

2 26 May 2014 Paragraph 7.9 amended to incorporate the Budget 2014 tax changes in relation to the removal of spousal transfer scheme. The subsequent paragraphs were renumbered.

3 2 Apr 2018 The main amendments include: a) Deletion of paragraph 1.3 and amendment of

paragraph 4.2 due to the expiry of the Enhanced Carry-Back Relief System.

b) Deletion of paragraphs 7.6 to 7.8 and amendment of paragraph 7.9 to update the Spousal Transfer Scheme.

c) Revisions to paragraphs 9.3-9.9 on the administrative requirements in making the election. The revisions to administrative requirements for companies take effect from YA 2010.

d) Removal of the time limit of 7 years for YA 2007 and before in paragraph 11.

e) Updating of examples and the Annexes.

4 9 Apr 2019 Paragraph 9.3 amended to incorporate changes to the administrative requirements in making the election.

5 8 May 2020 a) Paragraph 2.2 to make reference to the e-Tax Guide on “Enhanced Carry-back Relief System” for YA 2020

b) Deletion of paragraphs 2.7 and original paragraph 7.6 due to the phasing out of spousal transfer scheme from YA 2016. Example 1A in Annex G is amended accordingly.

c) Paragraphs 9.3 and 9.9 to incorporate clarifications on the documents to be submitted


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Annex A – Illustration of how the amount of qualifying deductions to be carried back is determined

1. ABC Pte Ltd has unabsorbed CA and loss for YA 2018 and has claimed for

carry-back relief 2. ABC Pte Ltd has normal chargeable income, donation and investment

allowance for YA 2017 3. ABC Pte Ltd's accounting year end is 31 Dec.

(Assumption: The same business test and the shareholding test are satisfied. YA 2017 and 2018 are not ABC Pte Ltd’s first 3 YAs which qualify for the tax exemption for new start-up companies.)

Tax Computations of ABC Pte Ltd for YAs 2017 and 2018

YA 2018

$ $

Trade

Adjusted profit before CA 0

Less : Current CA (35,000) (35,000)

Other income

Rental 24,000

(11,000)

Less: CA carried back to YA 2017 11,000

Unabsorbed CA for YA 2018 c/f NIL

Current year adjusted trade loss (70,000)

Less: Loss carried back to YA 2017 70,000

Unabsorbed loss for y/e 31.12.2017 c/f NIL

Unutilised investment allowance for YA 2018 c/f (Note 1) (25,000)

Chargeable income NIL

Tax thereon NIL


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Annex A (continued)

YA 2017

Original Assessment Revised Assessment

(before carry-back is allowed) (with carry-back allowed)

$ $ $ $

Trade Adjusted profit before CA 220,000 220,000 Less : Current CA 40,000 180,000 40,000 180,000

Other income Rental 30,000 30,000

210,000 210,000

Less: Donation - $1,000 (Note 2) (2,500) (2,500)

Investment allowance (40,000) (40,000)

167,500 167,500

Less: CA carried back from YA 2018 (11,000)

Loss carried back from YA 2018 (70,000) (81,000)

Chargeable income (before deducting exempt amount) 167,500 86,500

Less: Exempt amount (Note 3) (86,250) (45,750)

Chargeable income (after deducting exempt amount) 81,250 40,750

Tax thereon 13,812.50 6,927.50

Less: 50% CIT rebate (capped at $25,000) (6,906.25) (3,463.75)

6,906.25 3,463.75

Less: Tax previously assessed (6,906.25)

Tax to be discharged (3,442.50)

Note: 1. Investment allowance is not eligible for carry-back.

2. Donation made qualifies for 250% tax deduction under s37(3A) of the ITA.

3. Computation of exempt amount of normal chargeable income:

On the first $10,000 (75% of the income) 7,500 7,500 On the next $157,500 (50% of the income) 78,750 On the next $76,500 (50% of the income) 38,250

Total exempt income 86,250 45,750


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Annex B – Illustration of carry-back of qualifying deductions and order of deduction where there is more than one trade

Tax Computations of Mr Guan for YAs 2017 and 2018

YA 2018

$ $

Trade Sole-proprietorship business X - Adjusted profit before CA 0 Less : Current CA (80,000) (80,000)

Sole-proprietorship business Y - Adjusted profit before CA 50,000 Less : Current CA (70,000) (20,000)

Partnership business Z - Share of adjusted profit before CA 0 Less : Share of current CA (60,000) (60,000)

(160,000)

Other Income Employment 24,000

Rental 12,000

(124,000)

Less: CA carried back to YA 2017 (Note 1) 100,000

Unabsorbed CA for YA 2018 c/f (Note 2) (24,000)

Sole-proprietorship business X - Current year adjusted loss (60,000)

Partnership business Z - Share of current year adjusted loss (35,000)

Unabsorbed loss for y/e 31.12.2017 c/f (95,000)

8 Chargeable Income NIL

Tax thereon NIL

1. Mr Guan is a sole-proprietor of business X & Y, and a partner of partnership Z. 2. Mr Guan has unabsorbed CA and loss for YA 2018 and has claimed for carry-back relief,

but not the unabsorbed full CA is carried back. 3. He wishes to claim wife and child relief. 4. The accounting year end of Mr Guan’s sole proprietorship and partnership businesses

is 31 Dec.


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Annex B (continued)

YA 2017


(before carry-back

is allowed) (with carry-back

allowed)

$ $ $ $

Trade

Sole-proprietorship X - Adjusted profit before CA 80,000 80,000

Less: Current CA (35,000) 45,000 (35,000) 45,000

Sole-proprietorship Y - Adjusted profit before CA 95,000 95,000

Less: Unabsorbed CA for YA 2016 b/f (20,000) (20,000)

Current CA (25,000) 50,000 (25,000) 50,000

Partnership Z - Share of adjusted profit before CA 0 0

Less: Share of current CA (12,000) (12,000) (12,000) (12,000)

83,000 83,000

Partnership Z - Share of adjusted loss (6,000) (6,000)

77,000 77,000

Other income

Employment 40,000 40,000

Rental 18,000 18,000

135,000 135,000


Assessable income 135,000 35,000

Less: Personal reliefs

- Earned Income 1,000 1,000

- Spouse 2,000 2,000

- Child 4,000 4,000

- CPF 8,000 15,000 8,000 15,000

Chargeable income 120,000 20,000

Tax thereon 7,450.00 0.00

Less: Tax previously assessed 7,450.00

Tax repayable (7,450.00)

Note: 1. Computation of amount of CA to be carried back from each trade on a proportionate basis:

Sole-proprietorship business X: 100,000 x 80,000 / 160,000 = 50,000

Sole-proprietorship business Y: 100,000 x 20,000 / 160,000 = 12,500 Total = $100,000

Partnership business Z: 100,000 x 60,000 / 160,000 = 37,500 2. Computation of amount of CA to be carried forward from each trade on a proportionate basis:

Sole-proprietorship business X: 24,000 x 80,000 / 160,000 = 12,000

Sole-proprietorship business Y: 24,000 x 20,000 / 160,000 = 3,000 Total = $24,000

Partnership business Z: 24,000 x 60,000 / 160,000 = 9,000


18

Annex C – Carry back of qualifying deductions for a company deriving income subject to tax at a concessionary rate

Tax Computations of GHI Pte Ltd for YAs 2017 and 2018

YA 2018

Concessionary income

Normal Income

(Taxed at 10%) (Taxed at 17%)

$ $

Trade Adjusted Profit before CA 0 0

Less : Current CA (20,000) (15,000)

(20,000) (15,000)

Less: CA carried back to YA 2017 20,000 15,000

Unabsorbed CA for YA 2018 c/f NIL NIL

Current year adjusted trade loss (180,000) (70,000)

Less: Loss carried back to YA 2017 (Note 1) 74,950 29,147

Unabsorbed loss for y/e 31.12.2017 c/f (105,050) (40,853)

Chargeable Income NIL

Tax thereon NIL

1. GHI Pte Ltd has trade loss from its trade which was granted concessionary rate of tax of 10% for YA 2018 and has claimed for carry-back relief.

2. GHI Pte Ltd’s accounting year-end is 31 Dec.

(Assumption: The same business test and the shareholding test are satisfied.) YA 2017 and 2018 are not GHI Pte Ltd's first 3 YAs which qualify for the tax exemption for new start-up companies)


19

Annex C (continued)

YA 2017


(before carry-back is allowed)

(with carry-back allowed)

Concessionary Normal Concessionary Normal

income (10%)

income (17%)

income (10%)

income (17%)

Trade $ $ $ $

Adjusted Profit before CA 240,000 170,000 240,000 170,000

Less: Current CA (30,000) (25,000) (30,000) (25,000)

210,000 145,000 210,000 145,000

Less: CA carried back from YA 2018 0 0 (20,000) (15,000)

210,000 145,000 190,000 130,000

Less: Loss carried back from YA 2018 0 0 (74,950) (29,147)

Chargeable Income (before exempt amount) 210,000 145,000 115,050 100,853

Less: Exempt amount (Note 2 and 3) 0 (75,000) 0 (52,927)

Chargeable Income (after exempt amount) 210,000 70,000 115,050 47,926

Tax at 10% 21,000.00 11,505.00

Tax at 17% 11,900.00 8,147.42

32,900.00 19,652.42

Less: 50% CIT rebate (capped at $25,000) (16,450.00) (9,826.21)

16,450.00 9,826.21



Note:

1. The amount of loss c/f is computed as follows:

(a) Amount of CA carried back under 10% rate = $ 20,000 (which is equivalent to 20,000 x 10/17 = $11,765 @ 17%)

(b) Total CA carried back = $15,000 + $11,765 [i.e. amount in (a)] = $26,765

(c ) Amount of loss that can be carried back = $100,000 - (b) = $73,235

(d) Total amount of adjusted loss available for carry-back = $180,000 x10/17 (under 10%) +$70,000 (under 17%) =$175,882

(e) Amount of loss to be carried back [i.e. amount in (c )] apportioned as follows:

Under 10% : (105,882 /175,882 x 73,235 x 17/10) = $ 74,950

Under 17% : (70,000 / 175,882 x 73,235 ) = $ 29,147

2. Nil as the partial tax exemption is not applicable to concessionary income.

3. Computation of exempt amount for normal chargeable income:

On the first $10,000 (75% of the income) 7,500 7,500

On the next $135,000 (50% of the income) 67,500

On the next $90,853 (50% of the income) 45,427

Total exempt amount 75,000 52,927


20

Annex D1 – Illustration of carry-back of qualifying deductions and order of deduction where there is more than one trade subject to tax at different tax rates

Tax Computations of JKL Pte Ltd for YAs 2017 and 2018

YA 2018

Trade A Existing Trade



Normal Income

(Taxed at 5%) (Taxed at 10%) (Taxed at

17%)

$ $ $

Trade

Trade Profit before CA 0 40,000 0

Less : Current CA (90,000) (50,000) (45,000)

(90,000) (10,000) (45,000)

Other income

Interest - - 5,000

Rental - - 20,000

(90,000) (10,000) (20,000)

Less: CA carried back to YA 2017 (Note 1) 0 10,000 20,000

Unabsorbed CA for YA 2018 c/f (90,000) NIL NIL


(35,000)

Less: Loss carry back to YA 2017

(164,706/199,706 x 74,118 x 17/5) (Note 2) 207,836

(35,000 /199,706 x 74,118)

12,990

Unabsorbed loss for y/e 31.12.2017 c/f (352,164) 0 (22,010)

Chargeable Income

NIL

Tax thereon NIL

1. JKL Pte Ltd has income/loss from 2 or more tax rate categories, and has claimed for carry-back relief in respect of unabsorbed CA and loss for YA 2018. A new trade (Trade A) with income subject to tax at concessionary rate of 5% commenced only in YA 2018.

2. JKL Pte Ltd 's accounting year-end is 31 Dec.

(Assumption: The same business test and the shareholding test are satisfied. YA 2017 and 2018 are not JKL Pte Ltd's first 3 YAs which qualify for tax exemption for new start-up companies.)


21

Annex D1 (continued)

YA 2017




income (10%) income (17%) income (10%) income (17%) Trade $ $ $ $


Less: Current CA (60,000) (15,000) (60,000) (15,000)

90,000 120,000 90,000 120,000 Other Income Interest 0 15,000 0 15,000 Rental 0 40,000 0 40,000

90,000 175,000 90,000 175,000

Less: CA carried back from YA 2018 (10,000) (20,000)

90,000 175,000 80,000 155,000

Less: Loss carried back from YA 2018 - Loss from same trade (12,990)

- Loss from other trade (Note 3) (36,476) (39,672)

Chargeable Income (before exempt amount) 90,000 175,000 43,524 102,338 Less: exempt amount (Note 4 and 5) 0 (90,000) 0 (53,669)

Chargeable Income (after exempt amount) 90,000 85,000 43,524 48,669

Tax at 10% 9,000.00 4,352.40

Tax at 17% 14,450.00 8,273.73

23,450.00 12,626.13 Less: 50% CIT rebate (capped at $25,000) (11,725.00) (6,313.07)

11,725.00 6,313.07



Note: 1. JKL is not allowed to carry back the CA in respect of Trade A as it was not carrying on Trade A during the basis period

for YA 2017 (i.e. the same business test is not satisfied.)

2. The loss to be carried back is computed as follows

(a) Amount of CA carried back under 10% rate =10,000 (which is equivalent to 10,000 x 10/17 = 5,882 @ 17%)

(b) Total CA carried back = $5,882 + $20,000 = $25,882

(c) Amount of loss that can be carried back =$100,000 - $25,882 = $74,118

3. (a) The computation of adjusted assessable income for YA 2017 available for deduction from the loss carry-back is as follows: Concessionary

income (10%) Normal

Income (17%) - $80,000 x 10/17 (adjustment factor) $47,059

- Adjusted profit $135,000 - Less: Current year CA ($15,000) CA carried back from YA 2018 ($20,000) Loss carried back from YA 2018 ($12,990)

$87,010

(b) The loss (incurred under 5% tax rate category) of $207,836 carried back from YA 2018 to be apportioned to the concessionary income and normal income for YA 2017 is as follows: - under 10% tax rate category: $47,059/$134,069 x $207,836 x 5/10 = $36,476 - under 17% tax rate category: $87,010/$134,069 x $207,836 x 5/17 = $39,672

4. Nil as the partial tax exemption is not applicable to concessionary income

5. Computation of exempt amount for normal chargeable income: On the first $10,000 (75% of the income) 7,500 7,500 On the next $165,000 (50% of the income) 82,500 On the next $92,338 (50% of the income) 46,169 Total exempt amount 90,000 53,669


22

Annex D2 – Illustration of carry-back of qualifying deduction and order of deduction where there is one source of income subject to tax at different tax rate and one other source of income

Tax Computations of MNO Pte Ltd for YAs 2017 and 2018

YA 2018


Normal Income

(taxed at 10%) (taxed at 17%)

$ $

Trade

Trade Profit before CA 0 60,000

Less : Current CA (50,000) (15,000)

(50,000) 45,000

Other income

Net foreign dividend [net of tax at 10% of $1,000] 0 9,000

Rental 0 20,000

(50,000) 74,000

Less: S37B offset for CA (50,000 x 10/17) 50,000

(29,412)

Unabsorbed CA for YA 2018 c/f 0

44,588

Current year adjusted trade loss (1,000,000) 0

(1,000,000) 44,588

Less: S37B offset for loss (44,588 x17/10) 75,800

(44,588)

(924,200) 0

Less: Loss carried back to YA 2017 (100,000 x 17/10) 170,000

0

Unabsorbed loss for y/e 31.12.2017 c/f (754,200) 0


Tax thereon NIL

1. MNO Pte Ltd has normal chargeable income (including foreign dividend from a country with headline tax rate of less than 15%) and tax loss from its trade that was granted concessionary tax rate of 10% for YA 2018, and has claimed for carry-back relief.

2. MNO Pte Ltd’s accounting year-end is 31 Dec.

(Assumption: The same business test and the shareholding test are satisfied. YA 2017 and 2018 are not MNO Pte Ltd's first 3 YAs which qualify for tax exemption for new start-up companies.)


23

Annex D2 (continued)

YA 2017


(before carry-back is allowed)

(with carry-back allowed)


Income (10%)

income (17%)

income (10%)

income (17%)

Trade $ $ $ $


Less: Current CA (40,000) (25,000) (40,000) (25,000)

60,000 47,000 60,000 47,000

Other Income

Gross foreign dividend [tax on div at 10%] 0 20,000 0 20,000

Rental 0 35,000 0 35,000

60,000 102,000 60,000 102,000

Less: Loss carried back from YA 2018 (170,000) 0

60,000 102,000 (110,000) 102,000

Less: S37B offset (110,000 x 10/17) 110,000 (64,706)

Chargeable Income (before exempt amount) 60,000 102,000 0 37,294

Less: exempt amount (Note 1 and 2) 0 (53,500) 0 (21,147)

Chargeable Income (after exempt amount) 60,000 48,500 0 16,147

Tax at 10% 6,000.00 0.00

Tax at 17% 8,245.00 2,744.99

14,245.00 2,744.99

Less: Foreign tax relief (Note 3 and 4) (1,616.67) (998.14)

Net Tax Payable 12,628.33 1,746.85

Less: 50% CIT rebate (capped at $25,000) (6,314.17) (873.43)

6,314.16 873.42


Tax to be Discharged (5,440.74)

Note: 1. Nil as the partial tax exemption is not applicable to concessionary income. 2. Computation of exempt amount for normal chargeable income: On the first $10,000 (75% of the income) 7,500 7,500

On the next $92,000 (50% of the income) 46,000 On the next $27,294 (50% of the income) 13,647

Total exempt amount 53,500 21,147 3. Computation of foreign tax relief = 20,000/102,000 x 48,500 x 17% = 1,616.67 4. Computation of foreign tax relief:

(a) Based on the order of deduction, the loss carried back of $170,000 (@10% will be deducted from the same trade income (i.e. $60,000 @10%) first, followed by other trade income (i.e. $47,000 @17%). The balance of loss carried back of $17,706 [i.e. $64,706 - $47,000] will be deducted proportionately between foreign dividend ($20,000) and rental income ($35,000).

(b) Loss of $17,706 attributable to: - foreign dividend : $17,706 x 20,000/55,000 = $6,439 -rental income : $17,706 x 35,000/55,000 = $11,267 (c) Foreign dividend net of loss carried back = $20,000-$6,439 = $13,561

(d) Rental income net of loss carried back = $35,000 - $11,267 = $23,733

(e) Foreign tax relief = lower of: (i) 10% of $20,000 (i.e. $2,000) or

(ii) 13,561 x 16,147x17% = $998.14 13,561+23,733

24

Annex E – Illustration on how carry-back relief is effected where transfer under group relief system is made

1. PQR Pte Ltd has unabsorbed CA and loss for YA 2018. It has elected to transfer its loss items to its related company, STU Pte Ltd, whose assessable income for YA 2018 is $30,000.

2. PQR Pte Ltd has also elected for carry-back relief. For its YA 2017 assessment, PQR Pte Ltd has elected to claim loss items from its related company, VWX Pte Ltd, which has unabsorbed CA of $15,000.

3. PQR Pte Ltd’s accounting year end is 31 Dec.

(Assumption: The same business test and shareholding test, as well as all conditions stated in S37C of the ITA, are satisfied. YAs 2017 and 2018 are not PQR Pte Ltd’s first 3YAs which qualify for tax exemption for new start-up companies.)

Tax Computations of PQR Pte Ltd for YAs 2017 and 2018

$ $

Trade

Adjusted profit before CA 0

Less: Current CA (80,000) (80,000)

Other income

Interest 25,000

Rental 10,000

(45,000)

Less: Loss items transferred to STU Pte Ltd 30,000

(15,000)

Less: Current CA carried back to YA 2017 15,000



Less: Loss carried back to YA 2017 (100,000 - 15,000) 85,000

Unabsorbed loss for y/e 31.12.2017 c/f (75,000)


Tax thereon NIL

YA 2018

25

Annex E (continued)

Computation of exempt amount for normal chargeable income: On the first $10,000 (75% of the income) 7,500 7,500 On the next $221,000 (50% of the income) 110,500 On the next $121,000 (50% of the income) 60,500

Total exempt amount 118,000 68,000

Less: Tax previously assessed

Tax to be Discharged

$ $ $ $

Trade income

Adjusted profit before CA 240,000 240,000

Less: Current CA (55,000) 185,000 (55,000) 185,000

Other income

Interest 36,000 36,000

Rental 25,000 25,000

246,000 246,000

Less: Current year CA transferred from VWX Pte Ltd (15,000) (15,000)

231,000 231,000


Loss carried back from YA 2018 (85,000) (100,000)

Chargeable income (before deducting exempt amount) 231,000 131,000

Less: Exempt amount (Note 1) (118,000) (68,000)

Chargeable income (after deducting exempt amount) 113,000 63,000

Tax thereon 19,210.00 10,710.00

Less: 50% CIT rebate (capped at $25,000) (5,355.00)

5,355.00

Note 1


YA 2017


(9,605.00) 9,605.00

(9,605.00)

(4,250.00)


26

Annex F – Diagram showing order of deduction for companies at a glance

Current YA

Adjusted profit - Trade 1 AA Less: Unabsorbed CA b/f (BB) CC Less: CA for current year (DD) (EE) Adjusted profit -Trade 2 FF Less: CA for current year (GG) HH II Less: Unabsorbed loss - Trade 2 b/f JJ KK Adjusted loss - Trade 3 (LL) MM Rental income NN Interest income OO PP QQ Less: Unutilised donation b/f (RR) SS Less: current year donation (TT) UU Less: Amt transferred from Group Co under s 37C: - CA transferred (VV) - Loss transferred (WW) - Donation transferred ( XX ) (YY) ZZ Less: Amt carried back under s37E - CA (Note 1) ZA - Loss (Note 1) ZB (ZC) CI before exempt amt under s43(6) or (6A) ZD Less: Exempt amt under s43(6) or (6A) ZE Chargeable income ZF

Note 1: The total amount of CA and Losses to be carried back must not exceed $100,000

Company XYZ Company A

Immediate preceding YA Current YA

Adjusted profit - Trade 1 ZG

Less: CA for current year (ZH) (ZI) Adjusted profit -Trade 2 ZJ Less: CA for current year (ZK) ZL (ZM) Rental income ZN Interest income ZO ZP (ZQ) Less: Amt transferred to Group Company under s37C ZR (ZA) Less: Amt carried back under s37E ZA Unabsorbed CA c/f NIL Current year trade loss - Trade 3 (ZT) Less: Amt carried back under s37E ZB Unabsorbed current year loss c/f ( ZU) Unabsorbed current year donation c/f ZV Unutilised investment allowance c/f ZW Chargeable income NIL

Adjusted profit -Trade 1 ZX Less unabsorbed CA b/f (ZY) YA Less: CA for current year (YB) (YC) Adjusted profit -Trade 2 YD Less: CA for current year (YE) YF YG Less: Unabsorbed loss - Trade 2 b/f YH YI Adjusted loss - Trade 3 (YJ) (YK) Rental income YL Interest income YM YN YO Less: Unabsorbed donation b/f (YP) YQ Less: Current year donation (YR) ZR Less: Amt transferred from Group Company under s37C: - CA transferred (ZR) Chargeable income NIL


27

Annex G – Illustration on how carry-back relief is effected for an individual

Example 1A: 1. Mr Tan has only 1 source of trade income from his sole-proprietorship. He also derived

employment and rental income for YA 2018. 2. Mr Tan has unabsorbed CA and loss for YA 2018 from his sole-proprietorship business,

of which the accounting year end is 31 Dec. 3. Mr Tan wished to claim qualifying child relief in respect of his only child. 4. Mr Tan has elected to carry-back his unabsorbed CA and loss for YA 2018 to his YA

2017 assessment.

Tax Computations of Mr Tan for YAs 2017 and 2018

$ $

Trade

Sole-proprietorship business – Adjusted profit before CA 0

Less: Current CA (55,000) (55,000)

Other income

Employment 24,000

Rental 12,000

(19,000)

Less: CA carried back to YA 2017 assessment 19,000


Sole-proprietorship business – Current year adjusted trade loss (154,000)

Less: Loss carried back to YA 2017 assessment (Note 1) 81,000

( 73,000)

Unabsorbed loss for y/e 31.12.2017 c/f


Tax thereon NIL

YA 2018

28

Annex G (continued)

$ $ $ $

Trade

Sole-proprietorship - Adj profit before CA 77,000 77,000

Less: Current CA (35,000) 42,000 (35,000) 42,000

Other income


Rental 21,000 21,000

103,000 103,000

Less: CA/Loss carried back from YA 2018 (Note 1) - (100,000)



- Earned income (Note 2) 1,000 1,000

- Child 4,000 4,000

- CPF 8,000 13,000 8,000 13,000

Chargeable income 90,000 Nil



Tax to be refunded (4,500.00)


YA 2017


Note: 1. As Mr Tan has elected for carry-back relief, the full amount of $100,000 (i.e. $$19,000 + $81,000) must

be carried back even though he has $13,000 personal reliefs to deduct from his assessable income of $103,000.

2. Computation of earned income relief:

(a) Based on the order of deduction, the loss carried back of $100,000 will be deducted from trade income

of $42,000 first. The balance of loss carried back of $58,000 [i.e. $100,000 - $42,000] will be deducted proportionately between the employment income ($40,000) and rental income ($21,000).

(b) Loss of $58,000 attributable to employment income = $58,000 x $40,000 / $61,000 = $38,033

(c) Employment income net of loss carried back = $40,000 - $38,033 = $1,967

29

Annex G (continued)

Tax Computations of Mr Lim for YAs 2017 and 2018

$ $

Trade

Sole-proprietorship business U – Adjusted profit before CA 0

Less: Current CA (48,000) (48,000)

Sole-proprietorship business V – Adjusted profit before CA 50,000

Less: Current CA (35,000) 15,000

Partnership business W – Share of adjusted profit before CA 0

Less: Share of current CA (35,000) (35,000)

(68,000)

Other income

Employment 24,000

Rental 12,000

(32,000)

Less: CA carried back to YA 2017 32,000


Sole-proprietorship business U – Current year adjusted loss

(75,000)

Partnership business W – Share of current year adjusted loss (45,000)

(120,000)

Less: Loss carried back to YA 2017 68,000

(52,000) Unabsorbed loss for y/e 31.12.2017 c/f


Tax thereon NIL

YA 2018

Example 2: 1. Mr Lim is a sole-proprietor of businesses U and V, and a partner of partnership W. 2. The accounting year end of his businesses is 31 Dec. 3. Mr Lim has unabsorbed CA and loss for YA 2018 from all his businesses. 4. Mr Lim wished to claim qualifying child relief in respect of his child. 5. Mr Lim has elected to carry-back his unabsorbed CA and loss for YA 2018 to his YA 2017

assessments.

30

Annex G (continued)

$ $ $ $

Trade income

Sole-proprietorship U - Adj profit before CA 91,600 91,600

Less: Current CA (35,000) 56,600 (35,000) 56,600

Sole-proprietorship V- Adj profit before CA 65,000 65,000

Less: CA b/f (20,000) (20,000)

Current CA (25,000) 20,000 (25,000) 20,000

Partnership W – Share of adj profit before CA 0 0

Less: Share of current CA (12,000) (12,000) (12,000) (12,000)

64,600 64,600

Trade loss

Partnership W – Share of adjusted loss (6,000) (6,000)

58,600 58,600

Other income


Rental 18,000 18,000

116,600 116,600

Less: CA/Loss carried back from YA 2018 - (100,000)



- Earned income 1,000 1,000

- Child 4,000 4,000

- CPF 8,000 13,000 8,000 13,000

Chargeable income 103,600 3,600





YA 2017



31

Annex H – Illustration of deduction and restriction of capital allowances and trade losses of partners of an LLP

Partnership S&T is an LLP and has two partners (i.e. Mr Song and Topmost Pte Ltd). The LLP’s accounting year end is 31 December. Both partners have claimed for carry-back relief. The details of the LLP for YA 2017 and 2018 are:

Mr Song (Example 1) Topmost Pte Ltd (Example 2)

(A) Profit sharing ratio 30% 70%

(B) Contributed capital as at: a) 31.12.16 b) 31.12.17

$20,000

$60,000

$120,000

$175,000

(C) Adj profit/loss of LLP for y/e: a) 31.12.16 - Profit $ 93,000 b) 31.12.17 - Loss $120,000

$27,900

($36,000)

$ 65,100

($84,000)

(D) CA for: a) YA 2017 - $180,000 b) YA 2018 - $150,000

$54,000

$45,000

$126,000

$105,000

(E) CA & losses - Cumulative

YA 2017 YA 2018 YA 2017 YA 2018

$54,000 $135,000 $126,000 $315,000

(F) Contributed capital as at end of basis period

$20,000 $60,000 $120,000 $175,000

(G) Excess of cumulative CA and losses over contributed capital [(E)-(F)]

$34,000 $85,000 $6,000 $140,000

(H) Past relevant deduction

CA - $20,000 Loss - $ 0

$20,000

CA - $60,000 Loss - $ 0

$60,000

CA - $60,900 Loss - $ 0

$60,900

CA - $165,900 Loss - $ 1,175 (i.e. 9,100 - 7,925)

$167,075

:

32

Annex H (continued)

Example 1 - Tax Computations of Mr Song for YAs 2017 and 2018 YA 2018

$ $ $ Trade - Sole-proprietorship business- Adjusted profit before CA Less: CA

0

(35,000)

(35,000)

Restrict

- LLP – Adjusted profit before CA Less: CA b/f : Current CA

0 (6,100) (45,000)

(6,100) (33,900)

(11,100)

(75,000) Employment income 38,000 Rental Income 22,000

(15,000) Less: CA carried back to YA 2017 15,000

Unabsorbed CA c/f NIL

Unabsorbed LLP CA for YA 2018 c/f (11,100)

Sole-proprietorship business – Adjusted loss

(70,000)

Add: LLP adjusted loss 0 (36,000)

(70,000) Less: Loss carried back to YA 2017 70,000

Unabsorbed loss for y/e 31.12.17 from sole-proprietorship c/f NIL Add: Unabsorbed LLP loss for y/e 31.12.17 c/f (36,000)

Total unabsorbed losses c/f (36,000)


Tax payable NIL

Cumulative LLP CA & losses (54,000 + 45,000 + 36,000) (135,000) Less: Deduct from LLP profit in YA 2017 27,900 Deduct from other sources in YAs 2017 & 2018 60,000

LLP CA & losses c/f: - CA for YA 2018 c/f (11,100) - Loss for y/e 31.12.2017 (36,000) (47,100)

Summary of relevant deductions allowed in respect of:

(i) YA 2017 LLP CA = $20,000 (ii) YA 2018 LLP CA

- deduct from YA 2018 income

$60,000 x (6,100+33,900)/75,000 = $32,000

- deduct from YA 2017 income

$15,000 x (6,100+33,900)/75,000 = $8,000

$60,000

33

Annex H (continued)

YA2017 Original Assessment Revised Assessment (before carry-back is allowed) (after carry-back is allowed)

$ $ $ $ $ $ Trade - Sole-proprietorship biz - Adj profit before CA

Less: Current year CA

170,000

(15,000)

155,000

Restrict

170,000

(15,000)

155,000

Restrict

- LLP – Adjusted profit before CA Less: Current year CA

27,900 (54,000)

(20,000)

(6,100) 27,900

(54,000)

(20,000)

(6,100)

135,000 135,000 Employment income 48,000 48,000 Rental Income 30,000 30,000

213,000 213,000 Less : CA carried back from YA 2018 (15,000) Loss carried back from YA 2018 (70,000) (85,000)

213,000 128,000 Less: Personal Relief

- Earned Income 1,000 1,000 - Spouse 2,000 2,000 - Child 4,000 4,000 - CPF 9,600 16,600 9,600 16,600

Chargeable Income 196,400 111,400

Unabsorbed LLP CA for YA 2017 c/f (6,100) (6,100)

Tax payable 20,002.00 6,461.00



Cumulative LLP CA & losses (54,000) Less: Deduct from LLP profit in YA 2017 27,900 Deduct from other sources in YA 2017 20,000

LLP CA & losses c/f: - Unabsorbed CA for YA 2017 (6,100) - Unabsorbed loss for y/e 31.12.2016 0 (6,100)

34

Annex H (continued) Example 2 - Tax Computations of Topmost Pte Ltd for YAs 2018 and 2017

YA 2018

$ $ $ Trade income - Topmost Pte Ltd’s operations - Adjusted profit before CA


0

(55,000)

(55,000)

Restrict

- LLP - Adjusted profit before CA Less: Current CA

0

(105,000)

(105,000)

(160,000) Interest income 15,000 Rental Income 72,000

(73,000) Less: CA carried back to YA 2017 73,000


Trade loss Topmost Pte Ltd’s operations – Adjusted loss

(200,000)

Add: LLP current loss (9,100) (74,900)

(209,100) Less: Loss carried back to YA 2017 27,000

Unabsorbed loss for y/e 31.12.17 c/f [i.e. LLP loss $7,925 (i.e. 9,100 - 1,175) and trade loss $174,175 (i.e. 200,000 - {27,000-1,175})]

(182,100)

Add: Unabsorbed LLP loss for y/e 31.12.17 c/f (74,900)

Total unabsorbed losses c/f (257,000)


Tax payable NIL

Cumulative LLP CA & losses (126,000 + 105,000 + 84,000) (315,000)

Less: Deduct from LLP profit in YA 2017 65,100

Deduct from other sources in YAs 2017 & 2018 167,075

LLP CA & losses c/f: - CA for YA 2018 0 - Unabsorbed loss for y/e 31.12.2017 (9,100 – 1,175) c/f (7,925) - Unabsorbed loss for y/e 31.12.2017 c/f (74,900) (82,825)

Summary of relevant deductions allowed in respect of:

(i) YA 2017 LLP CA = $60,900 (ii) YA 2018 LLPCA

- against YA 2018 income

$87,000 x 105,000/160,000 = $57,094


$73,000 x 105,000/160,000 = $47,906 (ii) YA 2018 LLP loss


$27,000 x 9,100/209,100 = $1,175

$167,075

35

Annex H (continued)

YA 2017 Original Assessment Revised Assessment (before carry-back is allowed) (after carry-back is allowed)

$ $ $ $ $ $ Trade income - Topmost Pte Ltd’s operations – Adj profit before CA


300,000

(50,000)

250,000

Restrict

300,000

(50,000)

250,000

Restrict

- LLP – Adj profit before CA Less: Current CA

65,100 (126,000)

(60,900)

65,100

(126,000)

(60,900)

189,100 189,100 Interest income 20,000 20,000 Rental Income 60,000 60,000

269,100 269,100 Less : CA carried back from YA 2018 (73,000) Loss carried back from YA 2018 (27,000) (100,000)

Chargeable income (before deducting exempt amount)

269,100 169,100

Less: Exempt amount1 (137,050) (87,050)

Chargeable Income 132,050 82,050

Tax payable 22,448.50 13,948.50 Less: 50% CIT rebate (capped at $25,000) (11,224.25) (6,974.25)

Net tax payable 11,224.25 6,974.25



Cumulative LLP CA & losses (126,000) Less: Deduct from LLP profit in YA 2017 65,100 Deduct from other sources in YA 2017 60,900 LLP CA & losses c/f: - Unabsorbed CA for YA 2017 c/f 0 - Unabsorbed loss for y/e 31.12.2016 c/f 0 0

1. Computation of exempt amount of normal chargeable income:

On the first $10,000 (75% of the income) 7,500 7,500 On the next $259,100 (50% of the income) 129,550 On the next $159,100 (50% of the income) 79,550

Total exempt income 137,050 87,050

carry-back relief system...carry-back relief system 1 1 aim 1.1 this e-tax guide provides details on...

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